The global engineering and construction sector ended the third quarter of 2017 with a total investment interest of $54 billion, 24% lower than this time last year. While sovereign acquisition becomes more challenging due to regulatory policy and industrial consolidation, a global swing towards nationalism may be limiting cross-border investments.
The Construction Materials Manufacturing category has contributed to lower deal volume this year due to delayed infrastructure spending and rising material costs. Nevertheless, the category continues to drive overall deal value, indicating larger transactions in this area. Sector participants are looking to reinforce strategic capabilities and improve their competitive advantage in anticipation of higher spending in the public sector.
Despite above-average GDP growth in the Asia and Oceania region, the relative volume of transactions appears to be decreasing. Geopolitical and security concerns related to North Korea, Syria, and the Ukraine may be suppressing construction interest in bordering nations. Furthermore, a weakening US dollar has recently attracted foreign investment into the US.
Going forward, we predict ongoing discretion in the engineering and construction sector, as economic volatility and security concerns continue to rise tempering investment despite the global need in and around key segments and in particular infrastructure.
“M&A was largely flat in Q3 2017 compared to Q2 on both value and volume as long-term fundamentals supportive of segment growth (e.g., infrastructure repairs) are weighed down by a variety of factors, from regulatory to geopolitical.”